The U.K.’s FTSE 100 index
UKX, -0.19%dropped 0.9% to 7,716.74. The blue-chip benchmark turned lower as the pound
GBPUSD, +0.0778%
rallied on the back of a better-than-expected retail sales reading for April. Sterling bought $1.3374, compared with $1.3348 late Wednesday in New York.

In Turkey, the lira
USDTRY, +0.0245%
resumed its slide, even after the Turkish central bank on Wednesday intervened to halt the currency’s drop. The dollar bought 4.7438 lira, up from 4.5762 late Wednesday in New York.

What is driving the markets?

European stocks had traded close to the flat line most of Thursday, but were sent firmly lower in the afternoon after Trump called off a planned summit meeting with North Korean leader Kim Jong Un that was due to take place on June 12 in Singapore. Trump said it was inappropriate to go ahead with the meeting based on the “tremendous anger and open hostility” displayed Kim’s most recent statements.

“The World, and North Korea in particular, has lost a great opportunity for lasting peace and great prosperity and wealth. This missed opportunity is truly a moment in history”, Trump said in a letter to the North Korean leader.

In separate Trump news, the U.S. president rekindled concerns about a global trade war by announcing an investigation that could lead to U.S. import tariffs on cars. The news weighed on Europe’s car makers, and the Stoxx Europe 600 Automobiles & Parts Index
SXAP, -0.20%
fell 1.8% in Thursday’s action.

Conte was proposed as prime minister by the coalition of 5 Star Movement and League, which now stand to take power and make Italy the largest country in Europe to be led by an antiestablishment government.

The two parties are already on a collision course with the EU, having promised to challenge Brussels’s budget guidelines and rules on immigration.They have also vowed to increase fiscal spending and cut taxes — moves some worry could throw the Italian economy into disarray and create a new sovereign debt crisis.

What are strategists saying?

“We see two opposing forces impacting Italian and, by extension, euro-area assets. The slow-burning force is the deepening of the growth cycle, which is helping the balance sheet of the Italian economy to improve, boosting the performance of riskier asset classes,” analysts at UBS said in a note.

“The faster-moving force is the ebb and flow in political risk premium. Our working assumption has been that risk premium would not escalate dramatically enough to derail the positive impact from stronger growth. The events of the last few days in Italy have questioned our views. It is still early to shift camps. Yet it is high time to stress-test key assets and trades to levels of escalation in Italian risk premia,” they added.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.